… in naming Powell, Trump is picking an Obama-appointed Fed Governor for his most important nominations is itself quite fitting. While we have long known that bad monetary policy is bipartisan, Powell’s nomination serves as a particularly useful illustration of how little has changed in Washington since the Bush Administration.

Of course, just as Trump received his loudest applause from Washington for doing his best impersonation of his two predecessors, the President is already being praised for making a “grown up” decision when it comes to the Fed.

Its old tricks are bad enough, but when an wrecking-ball like the Federal Reserve Bank tries something “new,” there’s even more reason to be afraid:

“T]here is something new [and ominous] in the present [quantitative easing] cycle,” warns Murphy, Robert P. Murphy, in the latest Mises Institute “Austrian.”

“The Fed is trying to raise rates while simultaneously maintaining its bloated balance sheet. It is attempting to pull off a magic trick whereby it can keep all of the ‘benefits’ of its earlier rounds of monetary expansion (i.e., “quantitative easing” or “QE”) while removing the artificial stimulus of ultra-low interest rates. …”

“Raising interest rates without selling assets,” gives us “the worst of both worlds.

We still get the economic effects of “tighter monetary policy,” because the price of credit is rising as it would in a normal Fed tightening. Yet we don’t get the benefit of a smaller Fed
footprint and a return of assets to the private sector. Instead, the US taxpayer is ultimately paying subsidies to lending institutions to induce them to charge more for loans, while the big banks and Treasury still benefit from the effective bailout they’ve been getting for years. …

[1] SUPPORT OF “FAMILY VALUES”: whereby government promotes abstinence education, school prayer, and the old “Leave It To Beaver” lifestyle of sexual abstinent; of heterosexuals who married until death do us part with no drugs, abortions, or much booze. Those values were nostalgic and on the way out even in Beaver’s 1950s. While Bruce Jenner may no longer suffer gender confusion; many can appreciate that a nation that worships an Olympic athlete who is considering lopping off his manhood suffers moral confusion. The old time ideals still hold sway especially among the rural white Protestants in the “Red States”.

[2] CUTTING TAXES ON THE WEALTHY: In other words, “supply side economics” from the 1980s where tax rates of 70% were cut while the Federal Reserve jacked interest rates to 18% and led to renewed prosperity when inflation was finally conquered. People forget that Ronald Reagan and Bob Dole raised payroll taxes and that government spending skyrocketed. The “supply side” formula did not work under Bush-II and most people see that the bailouts enrich Wall Street megabanks and that billionaires like Donald Trump buy politicians of both parties, and don’t shy away from using eminent domain laws to grab private property and bankruptcy laws to default on $5 billion of debt. The middle-class treads water and the “working class” drowns (as its jobs disappear overseas or are lost to robots) while the Fiorinas come in, fire employees, tank the stock, and walk away with $100,000,000. Nevertheless, the “supply side” idea has enough libertarian appeal and sufficient economic common sense to garner political support.

[3] GLOBAL WARMONGERING: Where the neocons make war on demons intent on destroying us – Afghans, Yemenis, Libyans, Russians, Chinese, Syrians, Iranians, “terrorists,” and where we pump billions into defense contractors. The “bad guy” drumbeat never stops, with every beheading or “Russians expanding influence” or some or other existential threat to Peoria—such as Saddam Hussein’s nuclear-armed cruise missile “mushroom cloud”—constituting a reason to keep up the drumbeat. Fear is not only a great motivator but wins votes as well.

The 2015 Democrats have their basic pillars:

[1] TO BE THE MAJORITY OF THE “MINORITIES”: Immigrants, Hispanics, non-whites, non-Christians, non-heterosexuals, and feminists with enough identity grievances constitute a Democratic majority. Lesbians and Muslims may not have common cause, but do have a common enemy. Blacks and Asians have little love for one another, but the enemy of my enemy is my friend; and rural, heterosexual, anti-immigrant, white Protestant men are The Enemy.

[2] CIVILIAN GOVERNMENT EMPLOYEES/DEPENDENTS: Discounting the military and defense contractors who lean Republican, millions of academicians, Amtrak employees, elderly, students, welfare recipients, firefighters, Sallie Mae employees, social workers, TSA gropers, and their families get their compensation from the government. This forms an almost unstoppable bulwark even if a small percentage of that constituency are Republicans. Money means self-interest and money talks.

The libertarians, constitutionalists and non-interventionists who’re not into the Red and Blue- State identity politics only have apathy and cynicism to turn to. Also stuck in the middle of this muck are old rural white, gun-owning Jacksonians like Confederate descendant James Webb who started as a Democrat, left the party of McGovernization, worked as Reagan’s Navy Secretary, and then returned to the “old Democracy” after watching the neocon plutocrats of Bush-II screwing over his rural Virginian constituents.

Webb and others are as much political orphans as the libertarians.

The political season opens up with 2/3 of Republicans rejecting their own politicians for 3 candidates who never served in any public capacity. The Democrats are stuck with an openly corrupt ex-Secretary of State and Presidential spouse who raises billions from the Wall Street crowd. Or an aging Marxist who does not even belong to the party.

While a majority will stay home on election day, the only major motivation to vote is fear of the other party!

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Barely a Blog (BAB) contributor Myron Pauli grew up in Sunnyside Queens, went off to college in Cleveland and then spent time in a mental institution in Cambridge MA (MIT) with Benjamin Netanyahu (did not know him), and others until he was released with the “hostages” and Jimmy Carter on January 20, 1981, having defended his dissertation in nuclear physics. Most of the time since, he has worked on infrared sensors, mainly at Naval Research Laboratory in Washington DC. He was NOT named after Ron Paul but is distantly related to physicist Wolftgang Pauli; unfortunately, only the “good looks” were handed down and not the brains. He writes assorted song lyrics and essays reflecting his cynicism and classical liberalism. Click on the “BAB’s A List” category to access the Pauli archive.

Essentially, the monetary upheaval being experienced has come about because of a mere threat of the withdrawal of quantitative easing. The sell-off that “took the Dow Jones down more than 10 percent from its peak valuations” must be seen in the context of “seven years of zero percent interest rates,” avers fancier and Austrian Economist Peter Schiff. At work are gains that have come about likely not “from bona fide improvements in the economy,” but due to “the twin props of Quantitative Easing and zero percent interest rates.”

“The Fed has already removed one of the props, and it’s no accident that the markets have gained no ground whatsoever in the eight months since the QE program was officially wound down. As the market considers a world without the second prop, a free fall could ensue. …”

… Stock valuations [have been] extremely high and earnings are falling and the economy is clearly decelerating. The steady march upward in stock prices has been enabled by a wave of cheap financing and share buybacks. There are very few reasons to currently suspect that earnings, profits, and share prices will suddenly improve organically. This market is just about the Fed.